Publishers: Stop Refusing Our Money

mikezeman-brandawareBrand Aware” explores the data-driven digital ad ecosystem from the marketer's point of view. 

Today's column is by Mike Zeman, director of global programmatic marketing at Netflix.

Imagine you’ve walked into a convenience store to buy some milk. The cashier says, “That’ll be $5.” You hand him a $5 bill, only to be told, “I’m sorry, for anything above $1 we don’t take cash, only checks.”

You are bewildered. The store set the price of milk at $5. You try to pay in a way that is most convenient for both of you – no processing, just cash. And you’re denied.

Illogical, yes? This is what is happening across the digital marketing ecosystem today.

Today, most publishers are willing to put unsold inventory into the programmatic ecosystem for easy purchase. That’s the convenience-store equivalent of accepting cash for items that cost less than $1.

However, for formats and placements with a higher sell-through rate, such as home page takeovers or pre-roll, publishers create more friction in the buying process. They force marketers and agencies to work off an IO, rather than the more seamless process of enabling a demand-side platform (DSP) to procure access, which would be the “cash” in our metaphor.

Remember, just because a DSP is involved in the process doesn’t mean that the media must be auction-based. In other words, the buyer is not trying to pay less for the milk by using cash over other forms of payment, although it’s possible to make that argument based on sales overhead. Rather, the buyer is simply trying to pay the same amount in a way that is far more convenient for both parties in the transaction.

In a perfect world, this is a programmatic reservation. Short of that, a private or direct deal with a price floor equivalent to an IO-based buy does the trick.

And yet, the potential win for publishers doesn’t stop at “same money, made easier.”

Here’s another example. Imagine a business with 50% market penetration prefers spending media dollars on noncustomers for the purpose of acquisition. In today’s world, it can’t suppress its current customers from many of the premium placements it buys because, again, it is not programmatically enabled. This means its ad buys have an automatic 50% waste rate. Said differently, its effective CPM against its target is twice its actual paid CPM, say $5.

This presents an additional avenue to efficiency for both the buyer and seller. If the buyer was enabled to only target buy non-customers, it should, in theory, be willing to pay anything between $5 and $10. The publisher can therefore increase CPMs for this buyer and sell the balance of the inventory in a similarly addressable fashion to other buyers, such as pet owners to pet food companies. Now the publisher has made repeat buying easier while also increasing its effective CPM.

Publishers, by all means set the prices you see fit for your high sell-through inventory. But, don’t succumb to the misguided myopia that programmatic equals yield destruction. Marketers are ready to pay you more – and more often – for your valuable goods.

Take the money. And in the process, you will give your audience a more relevant advertising experience.

Follow Netflix (@Netflix) and AdExchanger (@adexchanger) on Twitter.

6 Comments

  1. Mike Finnegan

    From the pub-side:
    I like your approach, Mike. I run our programmatic solutions. When talking to media buyers, there's a "but its programmatic, it should cost less" default approach to all media, including high profile ads or ad positions. The argument from the buyer side is "we shouldn't have to pay as much because you're not guaranteeing impressions or managing it for us" when in reality, the added benefits of programmatic (global freq capping and audience targeting/suppression) create more value for the media.

    With all the benefits of programmatic, it's rendered the concept of a rate card virtually useless. And the channel conflict continues. We want to offer up our best inventory on the walled-garden ad units, but dont want to cut prices because the programmatic team is buying it, not the direct team. So maybe once agencies and brands rally around a more holistic way of evaluating media, and not letting the pipes dictate value, then we can have more fluidity in transacting the good stuff.

    Great article and i'm glad you're helping to shine a light on these ever-growing issues. Our collective hope is that Prog Guaranteed is the saving grace, though it will likely come with its own set of (technical) issues.

    Reply
  2. Great article and insights!
    Simply put, people fear what they do not understand. Some publishers feel uncomfortable with the subject of programmatic due to their lack of experience in the field. Others assume that embracing programmatic buying would commoditize their ad inventory and hurt revenues. Salespeople understandably prefer to have a signed IO to secure reaching quotas; thus making programmatic guaranteed deals the middle bridge. Ultimately, when (we) realize that delivering customized ads to the right audiences within the right contexts benefits all parties involved; providing better user experience and higher impact for the brand; it actually empower publishers to demand higher CPMs and being able to sell to the last impression.

    Reply
  3. Laura Brown

    I don't see a lot of effort on behalf of buyers to recognize and correct for the problems that programmatic creates for publishers. The idea that programmatic is "far more convenient for both parties in the transaction" is simply not a given on the publisher side.

    To start with (and to echo the comment above), there is absolutely an expectation from the buy side that programmatic inventory will cost less. We have no problem getting rate card CPMs from direct buyers, but programmatic clients balk every. single. time.

    Second, there's a hesitancy on the pub side to allow third parties the chance to skim money off the top of our inventory. This should be pretty self-explanatory.

    Third, I've noticed recently an influx of DSPs that have managed to win programmatic business that has no purpose, other than it feeling like a shiny, new toy. We recently had a popular brand reach out about a programmatic direct deal in which they wanted guaranteed inventory, promised 100% fill of all impressions we sent, based on our 1st party data, and requested they receive invoices from us. All of those terms would be FAR more efficient to meet if the brand were willing to buy direct, but the very popular DSP had gotten into the client's ear that the absolute only way to execute this buy was through their specific programmatic channel, integrated into their SSP, which, go figure, needed to be directly integrated into our site. When I called the vendor out on this, we lost the business.

    Having adtech vendors essentially blackmail me into implementing their product under a false guise of "programmatic efficiency" certainly doesn't make me inclined to move more inventory in their direction.

    It's not that publishers are bad at innovating and are simply dragging their heels on this. We're an innovative bunch. If it were actually more efficient and practical for publishers to integrate everything programmatically, we'd be doing it.

    Reply
    • Mike Zeman

      Hi Laura, thanks for your comment. First, I acknowledge your (and others' comments) that many buyers view programmatic as way to beat down CPMs. We don't. There are a few other progressive buyers that also don't. And, I understand that third parties get paid to participate in the transaction. That said, you still get to set the CPMs you want for your inventory. So, you can account for any SSP fees, etc. in your price setting. I also don't think direct buys are all that efficient. The selling and IO process (including collection, etc.) is far from perfect (it often involves copy machines!). You are no doubt an innovative pub. But, I would disagree with your closing paragraph. I think many publishers view this space as boogey-man to be feared rather than an opportunity to elevate yield over time. Sure, its early innings and there will be hiccups along the way. But, progressive marketers and progressive publishers should work together to move the ball forward. I firmly believe everyone wins.

      Reply

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